Rail passengers have seen fares increase during the recession because of a "perverse" franchise system that takes consumers for granted, a critical report by MPs says today.

Privately owned rail franchises have increased ticket prices by up to 11% on some routes at the worst possible time, according to the House of Commons transport committee, potentially causing long-term damage to the relationship between train operators and commuters.

The report is published as the government fights to restore credibility to the franchise system following the announcement that the UK's biggest rail contract, National Express east coast, will be nationalised. "A short-term approach and insensitive attitude towards passengers will damage train operators' relationships with their customers in the long-term," the committee says. "The system encourages and allows train operators to take their passengers for granted."

Under the franchising system, companies bid for the right to run trains on routes such as the Great Western or east coast main lines.

The contracts are often awarded to the train operator that offers the highest premium payments or, if the route requires heavy subsidies to be profitable, to the company that requires the lowest level of state backing.

But the recession forced train operators to impose the highest possible fare increases in January. Regulated rail fares, which account for 60% of journeys including all season tickets, rose by an average of 6% this year despite negative inflation.

"Train operating companies have taken advantage of the mechanism to raise fares at the worst possible moment and to a level which is out of all proportion to the real economy," the committee says. The transport secretary, Lord Adonis, said the report backed the government's fares policy, with price increases on season tickets and some off-peak fares limited to no more than 1% above inflation.

Those fares are expected to fall next year because the retail price index for July, which will be used when ticket prices are set for 2010, is forecast to be negative. "I pledge that the government will stick to this policy, which is likely to lead to most rail fares falling in January," said Adonis.

The Association of Train Operating Companies criticised the report, saying that MPs had attacked a system that now runs over 20,000 services a day with record levels of satisfaction and punctuality. It also rejected the committee's claim that passengers have been treated shoddily following the imposition of fare hikes earlier this year.

"Over 80% of passengers travel on discounted tickets. Train companies work hard to give passengers accurate advice on the best value fares."